Country Trade Risk Index (ERI): 92.49
Country risk reference rating: level 7 (7/9)
Country Risk Outlook: Negative
Economic and trade risks
In 2012, Vietnam’s nominal GDP was US$142.6 billion, the real economic growth rate was 5.0%, the per capita GDP was US$1,590, and the inflation rate reached 9.1%. The country’s industrial structure is agriculture (21.7%), industry (40.6%), and service industry (37.7%). The main industrial industries are textile, coal, metallurgy, machinery manufacturing, and chemical industry.
Affected by factors such as declining external demand and weak domestic economy, Vietnam’s economy will remain weak for some time to come. State-owned enterprise and banking reform remain important issues that policymakers need to address seriously.
In the past few years, Vietnam’s economy has been facing problems such as declining external demand, slow growth in domestic consumption and investment, and excessive inflationary pressure. In 2012, although some conditions improved, problems in state-owned enterprises and the banking industry resurfaced. Seriously hindering the recovery of Vietnam’s economy. In 2012, Vietnam’s real GDP growth rate reached a new low in recent years. Although the government promised to speed up the reform of the banking industry and state-owned enterprises, Vietnam’s overall economy will still grow at a low speed in the future.
Investment risk
In the past few years, foreign direct investment has promoted the rapid development of Vietnam’s economy. After the global economic recession in 2008, the scale of foreign direct investment in Vietnam dropped rapidly and has not yet fully recovered. Vietnam’s domestic macroeconomics are unstable and economic reform progress is limited. Despite its pledge to accelerate privatization, the government has so far refrained from selling large state-owned enterprises. Until Vietnam’s economic and investment environment improves significantly, there is little chance of another large-scale influx of foreign direct investment.
Vietnam’s business environment is at a medium level. The tax structure is complex, power infrastructure is insufficient, and the government’s investment protection for enterprises is insufficient. It ranks 99th in the Doing Business Index of 185 economies released by the World Bank, which is lower than the average level of countries in the East Asia and Pacific region. However, Vietnam is above the regional average in areas such as access to credit and enforcement of contracts. At the same time, government corruption is relatively common, administrative efficiency is low, transparency is low, and bureaucracy is prevalent.
Legal risks
Vietnam’s legal system started late but is developing rapidly. The Investment Law and the Enterprise Law are the main laws governing investment and business operations in Vietnam. Overall, Vietnam’s legal system is relatively sound, but legal enforcement is often interfered with by political factors and local corruption. There is a large gap between the legal system itself and specific implementation. It is often difficult for investors to predict how the Vietnamese government and legal departments will interpret the laws. and the application of legal terms, which bring certain difficulties to investments.
According to the standards of the World Bank’s Doing Business Report 2013, after a Vietnamese company files for bankruptcy, the average time it takes for creditors to collect relevant debts is 5 years, which is significantly higher than the average of 2.9 years in the East Asia and Pacific region: Bankruptcy procedures The required costs are lower than the average cost in the region; and in terms of recovery rate, the proportion of the amount recovered by the applicant from the bankrupt enterprise to its input is significantly lower than the regional average.
Overall risk
Vietnam is politically stable. The Communist Party of Vietnam adheres to one-party rule, has rich experience and a solid position. However, in the process of reform and opening up, Vietnam’s social conflicts have intensified. Problems such as serious corruption within the party, the wide gap between the rich and the poor, and the “land loss” of farmers have seriously affected the relationship between the party and the masses. At the same time, conflicts with some neighboring countries due to territorial and territorial waters have seriously affected the relationship between the party and the masses. Conflicts arising from disputes also occur from time to time. The macroeconomy faces various challenges, including slowdown in external demand and sluggish growth in domestic investment and consumption. The government has begun to reform state-owned enterprises and banks, but it will take a long time, during which the situation may further deteriorate and even trigger economic and social chaos. Inflation is easily affected by international price levels. Coupled with factors such as a weak local currency, limited international reserves, and often ineffective monetary policy, Vietnam’s inflation level may still fluctuate greatly in the future. (Issuing agency: China Export and Credit Insurance Corporation)
